The EU Carbon Border Adjustment Mechanism: What You Need to Know

EU CBAM at a glance

The EU Carbon Border Adjustment Mechanism (CBAM) charges importers for the emissions embedded in cement, iron and steel, aluminium, fertilisers, electricity and hydrogen brought into the EU from 1 January 2026. Importers above 50 tonnes a year file their first annual declaration and surrender certificates by 30 September 2027. Regulation (EU) 2025/2083, published on 17 October 2025, simplified the original 2023 rules, and the European Commission proposed on 17 December 2025 to extend the mechanism to 180 steel and aluminium downstream products from 2028.

How the EU got here: from pilot reporting to a carbon price

The EU adopted the mechanism in May 2023 to put the same carbon price on imports that EU producers pay under the EU Emissions Trading System, with a reporting-only transitional period from 1 October 2023 to 31 December 2025. Regulation (EU) 2025/2083, published on 17 October 2025, replaced the EUR 150 per consignment exemption with the 50 tonne threshold, moved the annual deadline from 31 May to 30 September, cut the quarterly certificate holding requirement from 80 to 50 per cent and limited verification to declarations based on actual emissions. The Commission adopted default values, verification and pricing rules in December 2025, and charging has applied since 1 January 2026.

What the CBAM requires

Authorised declarants report the embedded emissions of every covered import each year and surrender one CBAM certificate per tonne of CO2 equivalent, adjusted for the free allowances EU producers still receive.

• Authorisation before import: importers apply for authorised CBAM declarant status before importing; importers outside the EU use an authorised indirect customs representative.

• Annual declaration: by 30 September each year, the declarant reports the previous year's goods, embedded emissions and certificates surrendered in the CBAM registry.

• Embedded emissions: calculated from actual installation data under the Commission's calculation methods (Implementing Regulation 2025/2547) or from default values. Default values include a mark-up of 10 per cent in 2026, 20 per cent in 2027 and 30 per cent from 2028 for cement, iron and steel, aluminium and hydrogen, and 1 per cent for fertilisers.

• Certificates: sold from 1 February 2027 on a common central platform. For 2026 imports the price is the quarterly average EU emissions trading auction clearing price: EUR 75.36 for the first quarter, EUR 75.28 for the second and EUR 82.32 for the third. From 2027 the price is set weekly.

• Quarterly holding: from 2027, a declarant holds certificates covering at least 50 per cent of the embedded emissions imported so far that year at the end of each quarter.

• Carbon price paid abroad: a declarant can deduct a carbon price effectively paid in the country of production, net of rebates, with independent certification.

Who is in scope

Any business that imports covered goods into the EU above the 50 tonne threshold, or imports electricity or hydrogen, is in scope, wherever the goods were made.

Importers

The threshold counts the combined net mass of cement, iron and steel, aluminium and fertiliser imports across all customs codes per importer per calendar year. An importer that exceeds 50 tonnes becomes liable for all embedded emissions in that year's imports, from the first tonne. Splitting imports to stay under the threshold is a serious infringement.

Producers outside the EU

Installation operators in other countries can register in the CBAM registry and share verified emissions data with EU declarants, who then use actual figures in place of default values.

Supply-chain reach: steel, aluminium, cement and fertiliser producers worldwide face emissions data requests from EU buyers, since verified actual data carries no default-value mark-up. Food and agriculture companies feel the effect through fertiliser costs and steel and aluminium packaging.

Key dates and milestones

EU producers' free allowances fall from 97.5 per cent in 2026 to 14 per cent in 2033, so the share of embedded emissions importers pay for rises every year.

Why this matters beyond the EU

1. Supplier data becomes a price input. Every tonne of embedded emissions an importer cannot evidence is priced at a default value with a rising mark-up. Producers that measure installation-level emissions and share them through supplier engagement programmes spare their EU customers the default-value mark-up.

2. Part of the EU's wider rulebook. CBAM sits alongside the EU's sustainability reporting rules and the EU Deforestation Regulation. Read the EU climate disclosure rules page for how the Corporate Sustainability Reporting Directive applies to the same companies. Embedded emissions data for imported goods feeds both the CBAM declaration and a company's corporate carbon footprint.

3. Product-level emissions become a trade document. Embedded emissions per tonne of steel, aluminium or fertiliser travel with each shipment, so producers that sell into several markets need product carbon footprints calculated on one consistent method.

How companies should prepare

The 2026 import year closes on 31 December, so the data for the first declaration is being collected now.

• Establish your greenhouse gas inventory. Map every covered import by customs code, origin and installation, and connect it to your Scope 3 purchased goods and services inventory under the GHG Protocol.

• Map your value-chain exposure. Identify which suppliers produce covered goods and precursors, which have installation-level data, and which will default. Check fertiliser, steel and aluminium inputs bought through EU distributors as well as direct imports.

• Build assurance-ready processes early. Declarations based on actual emissions need an accredited verifier, and every figure needs a trail from installation data to declaration: where did this number come from?

• Build on the frameworks you already use. Transitional-period CBAM reports and corporate inventories hold much of the data. Plan certificate purchases against the 50 per cent quarterly holding rule from 2027.

How Terrascope can help

Terrascope's AI-powered platform helps importers and their suppliers move from baseline emissions data to audit-ready disclosures, including BBR VT, which screened 100 per cent of its suppliers, calculated supplier-specific embedded emissions for 80 per cent of its imported goods and automated its submissions in the CBAM registry.

• Scope 1, 2, and 3 emissions measurement. Integrations bring in supplier and installation data in any format, so embedded emissions sit alongside your corporate inventory.

• Audit-ready reporting. Audit Trail makes every figure traceable from supplier data to declaration, with verifier access built in.

• Supply-chain intelligence. Analytics shows which suppliers and customs codes drive your certificate cost, and where actual data would replace default values.

• Multi-framework alignment. ISSB Reporting uses the same dataset for climate reporting under EU, ISSB-based and voluntary frameworks.

Frequently asked questions

Speak to an expert

Are you ready to get ahead of the EU Carbon Border Adjustment Mechanism's 2027 declaration? Speak to a Terrascope expert and see how we help companies move from baseline emissions data to audit-ready disclosures.